Banking Industry Debates Comptrollers' Branch Denial

Did the U.S. Comptroller of the Currency do an injustice to
the four Oklahoma banks that had sought to branch beyond state
limits by taking so long to make a decision in the controversial
case?

The first of the four applications had been on file for 10
months before the Office of the Comptroller finally issued a
denial on May 5. The applications sat in the regulator's
Washington, D.C., legal office for most of that time.

Grumblings about a missed window of opportunity have been
heard from some bankers favoring the applications. Their position
is that the opportunity for approval existed from the time the
original statute limiting branching by statechartered savings and
loans expired in July 1993 until the Oklahoma Legislature enacted
an identical law in March.

Opponents of the applications counter that the emergency rule
instituted by Bank Commissioner Mick Thompson in June 1993
effectively kept any window firmly locked.

"I contend they never had a window of opportunity because the
administrative law took effect prior to the sunsetting of the
statute," said James P. McKeown, executive manager of the
Community Bankers Association of Oklahoma.

Paul Foster, general counsel for the Oklahoma State Banking
Department, said parity was the real issue. Since no
state-chartered savings and loan could ever branch into a banked
town, the national banks never had a basis for their
applications.

The four banks had sought to branch into towns that already
had banks. The branch applications were the first Oklahoma test
of a legal theory developed in a Mississippi case. That case,
known as Deposit Guaranty, allowed national banks in that state
to branch to the same extent as state-chartered savings and
loans, their competition.

The fact that the Office of the Comptroller of the Currency
denied the Oklahoma applications was not a surprise. The issue
was controversial from the beginning and as such had at best only
a 50-50 chance of succeeding.

The stakes were high _ an approval had the potential of
forcing open Oklahoma's restrictive branching laws. But a
positive result would have been met quickly with a legal
challenge, the end result of which might not have been known for
years. Action by the state Legislature in the meantime could have
made the whole point moot.

Bob Griffin, director of litigation for the comptroller's
office, offered an explanation for the length of time it took for
the regulator to decide the issue.

"These were the first Deposit Guaranty applications in
Oklahoma. . . They were not just regular branching applications.
On top of the other things you would look at in an ordinary
branching application, you have to look beyond the individual
bank."

In order to fit the Deposit Guaranty scenario, the comptroller
must first address the factual issue of whether the other entity
_ in this case, state-chartered savings and loans _ does banking
business in the state.

The Oklahoma applications also had the complication of
Thompson's emergency rule extending the branching restrictions
for state-chartered banks.

"That raised a legal question. Was it effective to national
banks under the McFadden Act? Also, I suspect there were added
policy considerations. Even if it was decided that legally they
could do it, would the comptroller want to do it?"

He suggested that Comptroller Eugene Ludwig, who is a lawyer,
has indicated that the agency should make sure it is doing the
right thing when it approves such issues.

The fact that the comptroller's office has won all four or
five of its Deposit Guaranty lawsuits might have added to that
element of caution. None of those suits were tried in the 10th
Circuit, of which Oklahoma is part.

Griffin also said he does not believe the comptroller's office
was waiting on the state Legislature to find out what action it
was going to take on the issue. …

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